21.04.2014

Subscribing to Wondela IPO, Actual Cash flow out will be based on allocation received later. We bid at cut off for INR 200,000.

 

Rationale

Decent valuation ~ Available at 13-14 times of next year earnings, almost debt free

Competent Management ~ V guard group had been efficient allocator of capital

Little Competition ~ Little or no competition in its own category

Regional player ~ I tend to like companies which have regional advantage and they stick to it

Peer valuation ~ Nicco park, Average in terms of customer feedback has PE of 23, also if you look at US players ( Comcast PE – 19+ , Disney – PE 21+), we should be safe when Wonderla is asking for 13-14 PE

 

Risks

1. Criminal proceedings pending over promoter company – Details available in DHRP

2. Continuous flow of capital is required to make new rides, hence business is money guzzler

3. Most of the equipment they buy is imported, Adverse Forex rates will hit them

4. In past group has not invested the IPO proceeds for the purpose it has got money from public

5. Cash flow is inconsistent only 2 out of last 4 years it is positive

 

In case you are inclined – read DHRP